How About Housing Help as Job Benefit?
High housing costs have become an insidious threat to the economic structure of the Greater Los Angeles area. Current figures show that only 20% of the area’s households have the income to buy the median-priced home of $219,000.
If ever there was a time for management to be creative in dealing with a problem that threatens their companies’ viability, that time is now.
Because of the affordability gap, companies are finding it increasingly difficult to attract competent new employees. Costly worker turnover and absenteeism is caused in part by a lack of nearby affordable housing. And in the final protest, firms are abandoning this area, taking with them precious jobs.
There is a growing awareness here by corporate leaders that getting involved in employer-assisted housing makes good business sense. When located near the work site, such housing reduces commuter time, stress and air pollution. Employers can replace redundant benefits. Wouldn’t it be wonderful, for example, in a situation where a working husband and wife both receive the same benefits if one could instead choose a housing benefit?
The reasons why companies should get involved are apparent, starting with long-term bottom-line profitability. How they get involved may not be so apparent. Opportunities for involvement do exist, as may be seen in the following examples.
Employer-assisted housing received a major boost with the announcement by the Federal National Mortgage Assn., commonly called Fannie Mae, that it had set aside $1 billion for employers seeking to help their workers buy homes.
As many as 20,000 moderate-income employees could be helped by the program, called Magnet, which could be especially beneficial in expensive urban areas such as Los Angeles County.
Home buyers seeking mortgage loans of up to $202,300 can qualify for the program with a minimum down payment of 5%. Employees will provide 3%, the employer 2%.
Among other possibilities are tax credits through housing syndication brought about by joint ventures. San Francisco’s nonprofit BRIDGE Housing Corp., using the tax credit provision of the 1986 Tax Reform Act, has raised more than $3 million in equity from corporate investors. The units created have been made available to employees as well as to low- and moderate-income households in the area.
Over the past eight years, more than 20 companies have worked with BRIDGE to create 2,200 units with another 2,900 in construction or planning.
In Los Angeles, the nonprofit Corporate Fund for Housing is in a joint venture with Cloverleaf Group Inc. to build 204 units of housing in the downtown Los Angeles area. The Community Redevelopment Agency owns the land but will lease the site to the builders for 55 years. Funding efforts include a tax-exempt revenue bond issue by either the CRA or Corporate Fund and corporate credit enhancements, i.e., a guarantee to back up mortgage or bond payments.
Keeping in mind that in the Cloverleaf proposal 30% of the units must be occupied by very low- to moderate-income households, the manager of the completed housing project can make known to these “credit enhancers” the availability of vacant apartments, thus offering them the first opportunity to fill the vacancies with employees.
UCLA has a trust deed with a twist--an interest differential allowance--among its menu of housing options. Under this plan, the borrower’s paycheck is augmented to help the person meet mortgage payments. At the end of a time frame, for example, seven years, a lump-sum payment, plus below-market-rate interest, is repaid to the lender, UCLA.
The state of California has an example of employee housing in which employers do not get involved. PFG Mortgage Inc. offers 15- or 30-year graduated payment loans to the 800,000 members of the Public Employee Retirement System. A minimum down of 10% is required on a purchase.
Loans start at a low interest rate. A no-point program is available and when combined with a low-interest, graduated payment loan, make affordable housing more reachable. Good job stability and a potential large volume of customers make this offer feasible.
Examples of imaginative and cost-conscious employer-assisted housing plans abound across the country, the principles of which could apply equally as well here.
First Federal Savings & Loan of North Carolina offers entry-level employees a down payment assistance program. First Federal makes a $6,000 no-interest, down payment loan. The principal is forgiven at the rate of 20% a year until the loan is forgiven. With recruitment and training costs averaging $7,500 over a five-year period, versus $6,000 in housing costs over the same period to retain an experienced employee, the financial assistance makes sense.
The New Jersey Housing and Mortgage Finance Agency issued $256.5 million in tax-exempt bonds to finance mortgages, a portion of which will finance an employer-assisted housing program. Bridging the gap to homeownership, the agency provides up to 100% financing while the employer guarantees between 10% and 20% of the loan for up to five years.
Through this employer guarantee and graduated annual mortgage payments an employee may qualify for a home whose value is up to 20% greater than what the purchaser would otherwise be qualified for under a conventional mortgage.
Air rights can be valuable in metropolitan areas. With that in mind, New York’s Hospital for Special Surgery sold air rights above the 14th floor of a 100-unit building. The money thus obtained paid in large part for the construction of the building which was then used to house hospital personnel at about one-half market rental rates.
One cannot go too long through a litany of examples without realizing that the interest nationwide in employer housing has increased dramatically in recent years. An estimated 300 U.S. employers provide some kind of housing aid to workers, not including hundreds of college and hospital-related plans.
Does employer-assisted housing have potential as an employee benefit? You bet. Especially since the Taft-Hartley Act was amended to allow “financial assistance for employee housing” and to allow unions and employers to create jointly run housing trusts.
In what may be a role model for unions and companies nationwide, Local 26 of the Hotel Employees and Restaurant Employees Union entered into an agreement with 13 major Boston hotels whereby the hotels agreed to contribute a nickel an hour for each worker.
The money will be placed into a revolving trust fund expected to reach $1 million by the end of the three-year contract. Governed by a board with three management and three union members, the fund will make low-cost loans to the local’s 3,000 members for down payments, closing costs, etc.
Affordable housing problems, even with decreasing federal aid, can be surmounted. Options other than relocating or going out of business exist. They are limited only by imagination and the will to participate.
